General Qualifiers for Jumbo Mortgages – If you are needing a home loan that covers more than $548,250, or $822,375 in more expensive housing markets across California, you will need a jumbo loan. But what are the qualifications of being able to secure a jumbo loan?
First of all, what exactly is a jumbo mortgage loan?
A jumbo loan is a home mortgage used to finance properties that have a higher price tag than the conventional conforming loan limit. These limits are set by the major federal mortgage backing entities of Fannie Mae and Freddie Mac. The maximum amount of a traditional conventional conforming loan is $548,250 on average for most areas across the country. Here in California and more expensive markets, this loan limit is raised to $822,375. Any home with a price tag that exceeds these numbers in a specific area will require a jumbo loan.
A jumbo loan is also called a non-conforming conventional mortgage. They are considered a little bit riskier for lenders because jumbo loans are not guaranteed or backed by Fannie Mae and Freddie Mac and this means that the lender is not protected from any losses if a borrower is unable to pay back the loan for any reason. Most jumbo loans are available with a fixed interest rate, but there are some adjustable-rate jumbo loans on the market as well. Each jumbo loan comes with its own terms as lenders are able to set their own parameters because there are no rules coming from federal entities for what they will back.
The most standard qualifiers for a jumbo loan
While each lender is totally within their rights to set whatever jumbo loan qualifications they would like, many lenders stick to a general set of jumbo loan qualifiers. In some cases, jumbo loan qualifications can be more strict than those of traditional mortgage loans and in some cases, they can be right on par with other loans depending upon the individual bank you are seeking to borrow money from. Here are some standard qualifications for jumbo loans.
Credit Score
Most lenders will require a FICO credit score to be higher than 700 and sometimes may even wish to see a credit score of 720 or higher to qualify for a jumbo loan.
Debt to Income Ratio
A large factor of determining your ability to qualify for a loan is debt to income ratio. This is used on pretty much every type of mortgage loan. This will help lenders to see your ability to afford your monthly mortgage payment and the risk factor of not being able to stay on top of your payments. The debt to income ratio measures what you bring in for income versus what you pay out in mandatory bills. Some lenders want to see debt to income ratio at 45% for a jumbo loan.
Cash Reserve
Those who have an ample amount of cash in the bank or most highly likely to be approved for a jumbo loan. It is not uncommon for a lender to ask a jumbo loan seeker for current bank statements to show their amount of cash reserves. Some lenders will like to see a cash reserve large enough to cover at least one year of mortgage payments.
Documentation
As another means of proving your financial health, there will be documentation required as solid proof. Sometimes jumbo loans may require more proof depending upon the specific type of jumbo loan and in some cases, a jumbo loan may require less. Today there are some jumbo loans that allow borrowers to use a stated income model.
The best way to find a jumbo loan that you can qualify for, and works best for your personal financial situation, is to work with a mortgage broker who is knowledgeable of all of the available jumbo loan mortgage products in your area.
For more information on jumbo loans in Mission Viejo and California please contact me anytime.
